What's Asset Allocation?

Asset Allocation is the process of determining optimal allocations for all of the broad categories of assets (such as Stocks, Bonds, Cash, Real Estate, etc.) that suit you, the investor and your specific investment time horizon, risk tolerance and need.

Each asset class will generally have different levels of return and risk. They also behave differently, and at the time that one asset is increasing in value, another may be decreasing or not increasing as much and vice-versa. (For example stock of a large company may be generating tremendous returns while government bonds may be not moving at all. And the next year this trend could differ severely.)

Asset Allocation addresses this issue and because market history has shown that not all asset classes move up and down at the same time, effectively allocating your assets over the various classes is a process that can attempt to combat market volatility while possibly increasing return.

History also tells us that some asset classes are far more volatile than others. They may go from big gains one year to big losses the next, while the performance of less-volatile counterparts remains within a much narrower range.

• While this process can be performed on any portfolio with two or more assets, it is most commonly applied to asset classes. This allocation is probably the most important decision and may account for more than 80 % of the return of the portfolio while the other 20% is accounted to management and market movement.

It is this 80% that makes it extremely important to follow the Investors Edge allocation strategy that is reviewed and rebalanced as needed. Without this rebalance or allocation the gains you realized this year may be lost next year.

It is our intent to give you the proper allocation for your risk tolerance and time horizon which will optimize both the risk and maximize your return potential.